Wall Street Surges Amid Fiscal Relief

The markets soared in the first trading session of the year as Wall Street traders breathed a collective sigh of relief that lawmakers finally passed legislation to avert the fiscal cliff.

Today's Markets

As of 3:00 p.m. ET, the Dow Jones Industrial Average surged 235 points, or 1.8%, to 13339, the S&P 500 soared 27.2 points, or 1.9%, to 1453 and the Nasdaq Composite rallied 76.2 points, or 2.5%, to 3096.

After months of political sparring on Capitol Hill, lawmakers finally passed a budget bill Tuesday. The move came after essentially 24-straight hours of wrangling in both chambers of Congress as the U.S. technically, if not briefly, slipped over the fiscal cliff. The deal that is expected to be signed into law by President Barack Obama extends tax cuts on single filers earning less than $400,00 a year and joint filers making less than $450,000. It also delays sequestration -- the painful automatic spending cuts associated with the fiscal cliff -- for two months.

Global markets cheered the news, with markets in Asia, Australia and Europe tacking on big gains in their first day of trading for the new year. Many economically-sensitive commodities roared higher as well.

Market participants were broadly relieved that the deal was passed, averting measures that could have dealt a painful blow to the world's biggest economy. Still, they struck a very cautious tone. Among the reasons for concern were the fact that the bill simply delayed the sequestration and failed to address the debt ceiling.

The U.S. has technically already hit the debt limit, forcing the Treasury Department to take "extraordinary measures" to give Congress headroom until about February. Last time the country pushed the upper bounds of the debt limit, it roiled the markets and cost the U.S. its pristine credit rating with Standard & Poor's.

"Considering there are so many headwinds facing the economy, including the debt ceiling negotiation in 60 days, the smart money knows the bullish sentiment will be short-lived. The lesson for investors here is 'buyer beware,'" Todd Schoenberger, managing partner at LandColt Capital wrote in an email.

Indeed, according to an analysis by Barclays, fiscal consolidation is likely to hit U.S. gross domestic product by 1.5% this year.

On the economic front, the latest Institute for Supply Management data show U.S. manufacturing activity increased to 50.7 last month from 49.5 in November. The index was expected to rise to 50.3. Readings above 50 indicate expansion while those below 50 indicate contraction

Commodities rallied. The benchmark crude oil contract jumped $1.30, or 1.4%, to $93.12 a barrel. Wholesale New York Harbor gasoline gained 1.2% to $2.795 a gallon. In metals, gold advanced $13.00 or 0.78%, to $1,689 a troy ounce.

Foreign Markets

The Euro Stoxx 50 soared 2.9% to 2711, the English FTSE 100 rallied 2.2% to 6027 and the German DAX jumped 2.2% to 7779.

In Asia, the Chinese Hang Seng surged 2.9% to 23312. The Tokyo Stock Exchange was closed for a holiday.